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June PCE and More Trade Deals ?3

09:30 31-Jul-25


June PCE numbers show the headline, Core, Income & Spending all increasing by 0.3%.  As Powell obliquely communicated yesterday, none of this is consistent with Fed rate cuts.  He was also at pains to repeat that these numbers, by and large, do NOT include the full effect of finalized tariff rates.

More of those are being announced this morning, starting with a Korean trade deal that sets tariffs at 15% and shakes the country down for $350b.  $150b of that will supposedly support Korean shipbuilders starting operations in America, and the rest toward semiconductors, batteries, biotech and energy.  An extra $100b in LNG and other energy purchases has also been reported, with details to be provided on a visit from the country's new president in the next two weeks.  Some analysts are already saying that this is a case of Trump getting the headlines and South Korea benefiting from the details.  Other trade deals with Cambodia and Thailand have also supposedly been reached, but details are not available.

So far, markets are reacting to these developments in the same way as prior tariff announcements, with American equity futures positive and other global markets negative.  However, corporate feedback differs, with Ford in particular already taking a tariff hit and that the cost of its vehicles will rise by thousands of dollars.  My take remains that these developments are positive for market indexes in short term, but will erode them over the medium to long term.